Investors are pouring billions into US mobile home communities — but residents are feeling trapped by rising rents (2024)

• Private equity firms have invested billions of dollars in US mobile home communities in recent years.
• In these communities, residents own their homes but rent the land beneath it, leaving them little power to fight rent increases and poor maintenance.
• In one Florida community, residents are considering legal action as conditions deteriorate and evictions increase.
• View more episodes of Business Insider Weekly on Facebook.

This story is based on an episode of Business Insider Weekly. Watch the full episode here.

Marcia Dahlquist felt stuck in a mobile home that was falling apart.

Gaping holes spread out across her kitchen floor, and her living room wall, each large enough for a person to fit inside. Cabinets and wall fixtures sat detached in a bathroom where water jugs were lined next to the toilet in case the water went out.

Dahlquist can't afford to fix her home, and she can't afford to leave.

That's because although she owns the broken floor and torn-up bathroom, the land beneath her house belongs to the owners of her mobile home park, Colony Cove, on Florida's Gulf Coast.

"They'll sue me for the rent until it's demolished," Dahlquist told Business Insider, adding that demolition costs "between $3,000 and $6,000."

Over the past decade, private equity investors have been buying up communities like Colony Cove and turning huge profits, thanks in part to government-backed loans originally meant to help people like Dahlquist.

But while investors have seen profits expand, many of the 22 million Americans living in mobile homes feel they've been left behind.

"The landlords take the benefits of the cheaper financing, put it in their pocket, make more investments, give it to their investors," Patrick Rucker, a correspondent for the research firm The Capitol Forum, told Business Insider.

"But for people on the ground in these aging mobile homes, things have gotten worse."

Mobile home owners face unique challenges that put them at a disadvantage.

Mobile homes are significantly cheaper than traditional homes, costing less than half the price per square foot.

There are 40,000 land-leased mobile home communities in the United States. In these communities, residents own their homes, but they rent the land beneath it.

This makes owning a mobile home similar to owning a car that you park in a rented spot in a garage.

But if the parking garage you are in starts to fall apart or the fee goes up, you can simply drive to a different garage and find a better spot.

That's not the case for mobile home owners, however. Despite their names, mobile homes are actually difficult to move for most people. Most homes are built in a factory and wheeled to the home site, and after the initial placement, moving the home can be costly.

So if the land rent rises, owners are faced with paying the higher rent or potentially abandoning their homes.

Some residents fear they'll be evicted if they complain about rising rents or deteriorating services.

Colony Cove is one of the biggest mobile home communities in the country. In 2011, Equity Lifestyle Properties, or ELS, bought the landbeneath Dahlquist and her neighbors' homes.

Business Insider Weekly visited the community in 2019 and spoke with dozens of residents about how life there has changed since the private equity firm came into the picture.

Although most homes weren't in as poor shape as Dahlquist's, numerous residents complained about the upkeep of the property, amenities, and rent increases.

Many residents said their annual rent increases can be as high as 5% per year. ELS told Business Insider Weekly that it has raised the rent an average of 4% a year over the last five years.

Others complained about their water being shut off too frequently and drainage problems that caused areas to flood. And some said they had problems with sewage coming up through the drains in their homes.

"I'm not dissatisfied with the rent. What I'm dissatisfied with is the quality of the service that I received for this rent," said Larry Kestner, a Colony Cove resident who has has lived in the community since 2008. "I feel that the park is almost out to agitate me."

ELS told Business Insider Weekly it is investing in drainage improvements and that when unscheduled water outages occur, it works with vendors to fix them as quickly as possible. In response to the complaints about sewage, the company said the wastewater and sewer systems are owned and managed by the county.

But residents who spoke to Business Insider Weekly said their complaints have often been ignored by the on-site manager. The company told us that ELS representatives meet regularly with the homeowners association and residents and all residents have access to the regional and corporate customer service numbers.

Most of the residents we spoke with refused to appear on camera or let us use their names. Many feared retaliation in the form of an eviction notice.

"There are a lot of rules in the prospectus that aren't enforced all the time," resident David Burnham said. "And if you become quite vocal … you may be a target of starting to enforce some really petty rules that would get you evicted."

ELS disputes this, saying they "encourage residents to reach out with any concerns" and that evictions are only carried out when a resident "engages in repeated or ongoing rule violations."

Data show that evictions skyrocketed after the private equity firm took over.

When ELS purchased the property in 2011, the eviction rate jumped immediately.

We looked at publicly available court filings and found that a year after ELS took over, the number of evictions tripled to an average of 42 per year. This works out to 2% of occupied homes per year over the last eight years.

In a statement to Business Insider, ELS said Colony Cove has had an average annual eviction rate of about 1% over the last seven years. The company did not respond when asked to clarify how it arrived at that figure and why it provided a higher figure — 1.7% over six years — to The Capitol Forum.

ELS said evictions are a last resort and generate losses. It told Business Insider Weekly, "We have current employees who were employed by the previous owner and they have confirmed that the protocol in place at Colony Cove today is substantially similar to the protocol in place historically."

Private equity firms have transformed the landscape of mobile home communities in recent years.

Mobile homes are an important source of affordable housing in the US. Because of that, government-sponsored entities Fannie Mae and Freddie Mac provide cheaper loans against these communities to increase the availability of this type of housing.

Billionaire private equity heavyweight Sam Zell started ELS in the 1990s, becoming one of the first big private equity investors to invest substantially in manufactured housing.

Zell talked about the huge success of his mobile home investments in 2015 in an interview with Bloomberg TV. When he was asked if the success would continue, he said he didn't know of any stock or company he was involved with that had a better prospect. The stock has since soared another 160%.

Over the past 10 years, ELS has borrowed at least $600 million through Fannie Mae and Freddie Mac to buy up these kinds of properties. It now owns more than 200 locations with over 70,000 homes and is one of the largest owners of mobile home communities in the US.

But many private equity firms jumped into this business more recently — borrowing billions over the past decade and building out their portfolios.

ELS has made clear in past financial statements that financing from Fannie Mae is important to its business. In a 2011 filing, the company says it received financing proceeds from Fannie Mae with terms that were relatively attractive compared to those available from other potential lenders, and if that changed, it might adversely affect cash flow.

Fannie Mae and Freddie Mac have provided more than $15 billion in financing against these communities in the past 10 years.

These government-sponsored entities have provided over $15 billion in financing against mobile home communities over the past decade.

Fannie Mae and Freddie Mac offer attractive rates that save investment firms money. Rucker, the Capitol Forum correspondent, estimates investors in mobile home communities have saved at least $200 million in interest from these loans.

Last year, a report on private equity investing in mobile home communities said these loans would be more effective if they had specific rules attached to protect the residents, like rent controls and rules that make it easier for residents to get out.

"I mean, this is taxpayer money essentially that's standing behind this whole enterprise, and we want the benefits to be direct — not some notional possible trickle-down scenario," Rucker said.

A Freddie Mac representative told Business Insider Weekly that "America has a shortage of affordable housing that is causing rents to rise across the board. Our work in manufactured housing communities is intended to provide stable financing that preserves affordability, and we're actively working to encourage more tenant protections where they are lacking."

Fannie Mae did not respond to a request for comment.

Meanwhile, Colony Cove residents are considering legal action.

Back at Colony Cove, residents have banded together to meet with a lawyer about potentially taking legal action against ELS. And they wouldn't be the first.

In 2017, ELS agreed to pay $10 million after residents of a California community made accusations of sewage backups, water outages, poorly maintained amenities, and the eviction of a resident for complaining. ELS maintains the allegations were without merit.

Despite their complaints, almost every resident we spoke to said they wanted to remain in the Colony Cove community because of the relationships they've formed with other residents.

After our visit, Dahlquist decided to take the hit on her deteriorating home. She found a house in the same community down the street with a lower monthly lot rent that she had an agreement to buy.

Unfortunately, her application to lease the land from Colony Cove was denied. She stopped paying her rent, and was evicted on her 77th birthday.